Putin gets the best of Barroso
Russian President Vladimir Putin closed a press conference in feisty form, slamming EU energy policy, Brussels, 21 December 2012
You can always count on Russian President Vladimir Putin to spice up an event. It would have been an overall uneventful EU-Russia summit, if it wasn’t for the disagreement between Brussels and Moscow over energy. Near the end of a press conference in the European capital on 21 December, although Putin and European Commission chief Jose Manuel Barroso were all smiles, they passionately exchanged jabs over the EU’s Third Energy Package with the Kremlin leader accusing the EU of discriminatory approaches and the Commission President blaming Russian companies for abusing their dominant position on the European market.
The EU's Third Energy Package came into force in March 2011. The EU document prescribes that Russian gas monopoly Gazprom should guarantee access to third parties a half of its gas pipeline network, prompting once again a strong response from Putin.
"I believe that adoption of the Third Energy Package, which is indeed retroactive and is applied in retrospect to the agreement that has been concluded before, is a clear violation of article 34,” Putin said, referring to the old Partnership and Co-operation Agreement. “In fact we believe that some actions of some of our partners in certain countries of the European Union amount to a confiscation of Russian investment,” he claimed. However, the Kremlin leader said he hopes the two sides will find mutually acceptable solutions, working in a business-like mode.
Turning to the pricing of energy resources within Russia, Putin reminded that Russia when it entered the World Trade Organisation (WTO) it did not undertake any obligations regarding the internal pricing. “These approaches are not applied by our European partners to other countries, including Norway, for example. Why are they sticking to such a selective approach? Why do they say that they can apply this instrument to Russia?”
In turn, Barroso defended the EU legislation, stressing that Brussels is respecting all international agreements and also the principles and rules of law. “Our system is non-discriminatory, it applies not only to Russian companies, but to European companies, American companies, Norwegian companies, companies from any parts of the world,” Barroso said, adding that it is fully compatible with the EU’s overall agreements because it allows for full liberalisation, creating more opportunities for trade and investment. “We have now more participation of Russian companies in the downstream market than we had before,” he said. "Your companies are most welcome in the European Union market. But they have to respect fully our rules. This is important to understand. We have a system of rule of law. Today it is the Third Energy Package and we have to make it respected by all our energy partners because this applies also to the EU companies.
Regarding pricing, Barroso said the problem is not the indexation per se. “Linking the price of gas to oil is not in itself a problem. The problem is when this has a direct impact on the market that creates a dominant position for a company in our market or part of our market. This is a problem we don’t have with Norway and we have in fact with some companies in Russia where they have a dominant position in some parts of our market. So there is no discrimination between Russia and Norway. Why should it be? But it is an objective application of the rules of competition and the internal market” Barroso argued.
He joked that since it’s not yet the end of the world, in 2013 Russia and the EU will further their discussion on energy matters.
But as the press conference ended, Putin made a late grab for the microphone, saying: "Just a second. My good old friend Mr Barroso outlined his position in such great detail, so emotionally, because he knows he is wrong. He knows he is wrong! And you witnessed our discussion! So please look at our Partnership Cooperation Agreement, article 34. The number is 34. Article 34 – Partnership Cooperation Agreement; Read it!"
Regarding linking gas prices to oil prices, Putin stressed that it was invented not by Russia, but by the Netherlands in the beginning of last century. "And it has applied throughout all these years without any problem. The price of oil establishes itself on world markets on an absolutely market basis,” Putin concluded.
Justin Urquhart Stewart, the director of Seven Investment Management Limited in London, told New Europe that despite the smiles and enthusiasm there is very little trust between Moscow and Brussels. “At the moment there is a great level of cynicism over their [Moscow’s] behaviour and it is up to the Russians to provide that level of confidence. The EU is growing increasingly suspicious of finding itself so dependent of sources of supply coming from Russia,” he said.
Earlier at the press conference, Putin reminded that Russia covers one-third of EU gas and oil demand. “It is our common goal to update and modernize energy infrastructure. We have completed the Nord Stream, which goes underneath the seabed of the Baltic Sea; we started construction of the South Stream, which will be laid on the shores of Black Sea; we are using the gas transportation system of Ukraine, it will be incorporated; we will be developing the Yamal-Europe pipeline. All of that will help strengthen the energy security of the European continent,” Putin said.
Urquhart Stewart said that it is inevitable that the EU’s dependence on Russian energy supplies will increase because of the new pipelines coming on stream. “But the EU will be pushing for further assurances that they are gonna have reliability of continuation of supply irrespective of political issues that may get in the way,” Urquhart Stewart told New Europe. But I urge them to be extremely cautious of any such agreement because until Mr Putin can give us a level of confirmation that he is going to be reliable, we should assume that constriction could be applied at any time.” new europe on line
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